History of Microfinance

Definition of 'Microfinance'A type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.

Investopedia explains 'Microfinance'Microfinancing is not a new concept. Small microcredit operations have existed since the mid 1700s. Although most modern microfinance institutions operate in developing countries, the rate of payment default for loans is surprisingly low - more than 90% of loans are repaid.

Like conventional banking operations, microfinance institutions must charge their lenders interests on loans. While these interest rates are generally lower than those offered by normal banks, some opponents of this concept condemn microfinance operations for making profitsoff of the poor.

The World Bank estimates that there are more than 500 million people who have directly or indirectly benefited from microfinance-related operations.

Read more: http://www.investopedia.com/terms/m/microfinance.asp#ixzz2AhH8VN6h Microfinancea means of extending credit, usually in the form of small loanswith no collateral, to nontraditional borrowers such as the poor inrural or undeveloped areas. This approach was institutionalized in1976 by Muhammad Yunus, an American educated Bangladeshieconomist who had observed that a significant percentage of theworld's population has been barred from acquiring the capitalnecessary to rise out of poverty. Yunus set out to solve thisproblem through the creation of the Grameen...

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...Practical Challenges of Microfinance Institutions Dilin Lim Master in Advanced Finance candidate December 2009
Completed with direct supervision of: Prof. Eloy Gracia
This research paper discusses the optimal combinations of stable funding and operating efficiency of Microfinance Institutions to reduce interest lending levels to the Micro Entrepreneurs.
PRACTICAL CHALLENGES OF MICROFINANCE INSTITUTIONS
HYPOTHESIS: In all models of microfinance, what are required are optimal combinations of stable funding and operating efficiency. We will examine to what extent the operational aspects of developing an efficient lending structure, transparency, loan follow-up and stable sources of funds contribute to the reduction of interest rates paid by the poor i.e. the client. INTRODUCTION The considerable interest that has been developed in the financial world and academia for the topic of microfinance cannot be underestimated. In fact, one of the most impressive developments in the world of social economic development in the last few years has been the successful explosion and impact of microfinance on society at large. Ever since socio-economic development became institutionalised in the form of the objectives guiding development banking, the elimination of poverty has been proved elusive. However, well known bottom of the pyramid seems to have now found in Microfinance is...

...1. Introduction
Microfinance is the provision of financial to people who are living in poverty. The system is providing small loans to poor person who want to expand their business. A series of financial service include loaning, saving, insurance and so on. There are two main characteristic on microfinance. Firstly, it is focus on below average income person or poor person for their customers. Secondly, it must ensure that the possibility of its own sustainable development. The beginning of the activity was most closely associated with economist Muhammad Yunus in 1976. He was born in Bangladesh. Between 30 years, the success of Grameen Bank which was built by Yunus was noticed by the world. Then, microfinance has covered nearly development countries and some developed counties.
In the case of the text book, microfinance was present by two extreme parts, macro success and global mess. For the macro success, lender loaned money to women in order to support their family. Then, much family got rid of poverty. By 2001, more than 7,000 microfinance institutions had served 120 million borrowers around the world. On the other hand, there are two debates lead to huge problems. Firstly, most of microfinance institution’s new shareholders were rich investors. Secondly, several competitive microfinance institutions loaned money to the same uneducated clients, if crop or ventures...

...PROJECT REPORT
ON
“MICROFINANCE”
SUBMITTED BY
PARAMJOT KAUR BHOMER
ROLL NO:03 [TYBFM], SEMESTER V
GURU NANAK KHALSA COLLEGE
TO THE UNIVERSITY OF MUMBAI
IN PARTIAL FULFILLMENT OF
BCOM IN FINANCIAL MARKETS
2010-2011
CERTIFICATE
THIS IS TO CERTIFY THAT THE PROJECT REPORTED TITLED
“MICROFINANCE”
MADE BY PARAMJOT KAUR BHOMER, TYBFM OF GURU NANAK KHALSA COLLEGE, MUMBAI, IS CARRIED OUT UNDER MY SUPERVISION IN THE ACADEMIC YEAR 2010-2011.THE INFORMATION SUBMITTED IN THIS PROJECT IS AUTHENTIC TO THE BEST OF MY KNOWLEDGE
SIGNATURE OF PROFESOR GUIDE SIGNATURE OF STUDENT
SIGNATURE OF H.O.D COLLEGE STAMP
DECLARATION
I, PARAMJOT KAUR BHOMER OF GURU NANAK KHALSA COLLEGE, TYBFM, SEMESTER V, DECLARE THT I HAVE COMPLETED THIS PROJECT ON-
“MICROFINANCE”
IN THE ACADEMIC YEAR 2010-2011, UNDER MY PROJECT GUIDE:
PROFESSOR FAROOQUE MOHD ALI
GURU NANAK KHALSA COLLEGE.
THE INFORMATION SUBMITTED IN THIS PROJECT IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.
SIGNATURE OF THE STUDENT
ACKNOWLEDGEMENT
It gives me immense pleasure to present this project on-
“MICROFINANCE”
This project has given me the opportunity to closely study the services provided by the microfinance and how it helps in the development by eradicating poverty.
I am highly...

...Does the evidence on the use of special microfinance financial instruments indicate that they are successfully solving the problems of financial service provision in EME’s?
Introduction
Lack of access to credit is generally seen as one of the main reasons why many people in developing economies remain poor. Microfinance is banking for the poor. Mission, target group, and the applied credit technologies are features clearly distinguishing microfinance from the traditional banking sector. The poor in developing economies have increasingly gained access to small loans with the help of so-called microfinance during the past ten years.
The essay’s objective is to introduce microfinance and its financial instruments and then discuss if it successfully solving the problems of financial service provision in EME’s.
The Definition of Microfinance and Its Development
Microfinance is defined as is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services. The microfinance is nothing short of a revolution or a paradigm shift (Robinson 2001). The microfinance movement has helped to reduce poverty, improved schooling levels, and generated or expanded millions of small businesses (e.g. Khandker 1998). The idea of...

...developmental aid and although some have had success, some have not. Among these various methods, microfinance as a new tool for development began getting much attention from international institutions and donors. The microfinance program recognized by Mohammad Yunus, established the Grameen Bank in Bangladesh, and now plays a large role in development. In the past, large institutions such as the IMF and the World Banks would impose strategies and practices like the Washington Consensus on developing nations. The microfinance approach directly provides credit to the hands of the poorest individuals, allowing them the opportunity to better their quality of life. Rather than using the traditional trickledown effect, it claims to start from the bottom and working its way up. As new development tools try to provide democratic system, they always steer towards portraying neoliberal characteristics. Can microfinance be used as a new prominent development model which allows the impoverished people of a developing nation to have active participation within the political, socio-economical and development spectrum of their communities; or it this method creating more oppression and overlooking major social components that generate inequalities within cultures and communities that is constraining growth?
This paper will focus on two country case studies, Bangladesh and Bolivia. In Bangladesh, microfinance was...

...thrift, credit and other financial services and products of very small amounts, with the aim to raise income levels and improve living standards. Most notable among these microfinance approaches is a nationwide attempt, pioneered by non-governmental organizations, and now supported by the state, to create links between commercial banks, NGOs, and informal local groups (‘self-help groups’, or SHGs). Better known as ‘SHG Bank Linkage’, evidence suggests that the model has effectively targeted poorer segments of the rural population and helped reduce the vulnerability of its clients. The growth of SHG bank Linkage has been truly remarkable, particularly since the late 1990s. In 2003, the number of SHGs linked to banks were close to 800,000, compared to just 33,000 in 1999. SHG Bank Linkage reaches some 12 million women and their households. But outreach is still modest in terms of the proportion of poor households served, covering less than 5% of India’s rural poor.
SHG Bank Linkage seems to have all the right ingredients for scale-up. This paper argues that the success achieved so far by SHG Bank Linkage is attributable to the following key factors, that may also be relevant to other microfinance models in India and elsewhere. First, is the fact that SHG Bank Linkage is well aligned with Indian history and circumstances, and capitalizes on the country’s vast network of rural (formal) bank branches, while building in the...